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The "rich people donate money to avoid paying taxes" meme has always been odd to me. If you donate $1, yes, your tax bill is lower, but you are also out $1. Unl
by gfodor 9y ago
The "rich people donate money to avoid paying taxes" meme has always been odd to me. If you donate $1, yes, your tax bill is lower, but you are also out $1. Unless you are corrupt and are funneling money to your own foundation or something, donating money is not a way to beat the system wrt taxes, its just a way to shift money that otherwise would have gone to the government to charitable entities instead.
Also, it results in more loss of wealth for the donator: if I owe the government $1 in taxes, I can choose to pay the government that $1 or, if I loathe the idea of the government getting that $1 and I can afford it, I can choose to give ~$3 to a charity instead.
The fact that rich people choose to donate to charity at a rate of about 3:1 instead of paying the government says a lot about their faith in the government in spending their money wisely.
- loceng 9y agoRight, you'd be out that $1 because the government is getting it -as it goes to the tax collector, and then it is distributed to all of society, or well, how that government currently allocates spending/resources. It's not a matter of trying to beat the system, donating to a charity is an opportunity afforded by governments (not sure all of them do) to allow the individual an opportunity for the money to go to a specific cause instead of to society in general - which is why charities are regulated and have rules, albeit perhaps not regulated well enough. Edit to add after you added to your comment: Perhaps I better needed to separate (and improve) my understanding of taxes - and the distaste for how profits are realized in incentivized crypto-assets. Thanks for engaging.
- ikeboy 9y agoFred Wilson had a recent post where he explained how donating stock that has highly appreciated can mean a $100 donation is effectively $12 from you and $88 from federal and state governments. See https://avc.com/2018/05/giving-publicly-traded-stock-to-charity/ https://avc.com/2018/05/giving-publicly-traded-stock-to-char...
- mmastrac 9y agoI'm not a US tax expert, but crypto would work the same as appreciated shares in Canada with similar numbers. Even then, you're still out $12. Though magnifying the impact of a $5M effective contribution to $55M with donations to causes that I support is tempting.
- hndamien 9y agoAnd forcing the Government to spend on something that you want rather than what the Government/ society would want.
- mkirklions 9y agoCan I do this with Bitcoin?
- ikeboy 9y agoIf you have taxable gains, presumably. Are you in a high-tax state?
- mkirklions 9y agoMy household income is going to be over 200k this year...
- lmm 9y agoYour "charity" doesn't have to be very charitable. It can employ your friends on high salaries, it can promote your own political causes, it can promote your own hobbies/interests. It could be an art museum in the house next door to you open only by appointment with you, for a particularly transparent recent example.
- maxerickson 9y agoPineapple Fund has gotten a bunch of public thank yous from the recipient organizations, so that isn't the case here.
- gfodor 9y agoYes, that's why I explicitly stated it as a loophole, but that's not at all what we're talking about here (the Pinapple Fund somehow not being "generous" because the donator took advantage of tax breaks due to donations) or in general.
- mkirklions 9y agoI run/donate to our charity. Politics is a gray area with 501c3s and 501c4s being vastly different tax benefits. Employing friends means they still need to pay income tax right? We teach recipes to kids, which kinda is a hobby? I just want kids to learn low cost recipes and have freedom from their parents. Maybe some people are malicious, but I am not.